Bad Credit Car Loans: What You Need to Know Before You Apply

If you’re in the market for a used car, you may need help with financing. Financing enables you to obtain a loan to cover the expense of your vehicle, which you will pay back in monthly installments over several years. However, if you have poor credit, you might find it challenging to get approved for a regular loan. 

At Insta Auto Solutions, we can support you in financing your new car by providing you with access to what is known as a “bad credit car loan.” In this article, we’ll tell you all about car loans and what you need to qualify for one. 

How Is Your Credit?

When we talk about credit, most people automatically think about their credit score. Your credit score is a number that sits anywhere between 300 and 900 and is a reflection of how well you manage your credit. Lenders use this score to determine the likelihood that you will repay your loan. While a credit score of between 700 and 900 is ideal, this is not the only factor that a lender will use to approve your request for credit. 

The Importance of Established Credit

Lenders will also look at your payment history to see if you pay your bills on time or have missed payments. They assess how many sources of credit you have and the length of your credit history. Lenders like to see an established history for several sources of credit; this is why having utility bills, credit cards, and loans all help to establish good credit. 

What Happens If You Have Poor Credit?

While on the surface, poor credit seems like a worrisome thing, it’s not! The good news is that you can still qualify for loans when you have poor credit. At Insta Auto Solutions, we’ve helped hundreds of people get a car loan with bad credit. We do this by offering bad credit car loans. 

What Is a Bad Credit Car Loan?

A bad credit car loan is designed specifically for people who have bad credit and can’t get a regular car loan through the banks. Even if you have a poor credit score or a limited credit history, there are many lenders who will give you an auto loan. 

What Is the Interest Rate for a Bad Credit Car Loan?

The main difference between a loan from the bank and a bad credit car loan is that the interest rate and the loan terms differ. If you have limited credit, lenders view you as a risky borrower. They may then charge you higher interest fees. 

The actual interest rate you receive depends on your lender and your credit history, but it could be closer to the current prime rate or as high as 30 to 40%. 

Who Can Apply For a Bad Credit Car Loan? 

If you are over 19 years of age in Alberta, you can apply for auto financing. Bad credit car loans are ideal for people who have limited or damaged credit, including individuals who have claimed bankruptcy, newcomers to Canada, students, and others who have poor credit. 

How to Apply For a Bad Credit Car Loan

Applying for a bad credit car loan is easy. You simply need to provide the following, and we’ll take care of the rest:

• A valid driver's license.

• Your last two pay stubs or last six months of bank statements.

• After you receive loan approval, you’ll need a void cheque or pre-authorized debit form.

You can get pre-approved for your loan online. It only takes a few minutes of your time, and we can even get back to you with an answer on the same day. 

The Benefits Of Taking Out a Car Loan

Even though the interest rates might be higher than for a regular bank loan, taking out a bad credit car loan has its benefits. Firstly, you get into the car you need, and secondly, it allows you to build your credit so you can benefit from more favourable loan terms in the future. 

New Source of Credit

It is not enough to have several credit cards; it is better to show multiple types of credit, from credit cards to utility bills to loans. As a new source of credit, your loan will be viewed favourably by lenders who you look to borrow from in the future. 

In addition, car loans tend to be a larger source of credit, so if you make your monthly payments on time, you’ll show that you can manage your credit responsibly.  

Refinance When You Build Up Your Credit

Even though the interest charges on bad credit car loans may be high, make your payments, and when your score goes up, you can refinance for a better rate! This is a great strategy that gets you the car you need and gives you the opportunity to build your credit. 

The Benefits of Shopping Around For a Car Loan

Taking out a car loan is a serious business, so it’s important that you do so with professional advisors who know what they’re doing. The downside of working with a company that doesn’t understand how to work with credit is that they can severely damage your credit score. 

How Can Shopping Around For a Car Loan Damage Your Credit Score?

Every time you apply for a loan, the lender will do a credit check. Credit checks may knock a few points off your score, but multiple checks will do some serious damage. In addition, if lenders see that multiple checks have been done on your account, they may view this as a warning sign that other lenders won’t give you credit. 

For this reason, it’s essential that you work with a company that you trust and has the expertise to manage your credit properly. Word-of-mouth referrals are great, but take a look at used car dealership reviews, including Google as well. Knowing what other customers are saying about the business allows you to make an informed choice. 

How Insta Auto Solutions Can Help You

At Insta Auto Solutions, we care about helping you find the right car and improving your credit score.

We Offer a Large Selection of Vehicles

We have a large selection of vehicles on our lot, with plenty of all-wheel drives to keep you moving safely on icy roads. All our vehicles are inspected with strict adherence to safety protocols to give you peace of mind. 

We Welcome Trade-Ins

Trade in your existing car and apply its value to your new all-wheel drive! You can get an estimate for your car by using our What’s My Car Worth tool.

Refinance for a Lower Interest Rate

If you are looking to build up your credit, we’ll stay in touch and help you make your next move.  Once you have a good track record of at least a year of regular payments and your financial situation has improved, we’ll reassess your credit situation and get you refinanced with a better rate. 

Are You Financed Somewhere Else? 

If you are financed with another company and are looking to take advantage of a better interest rate, you can still refinance your vehicle with us. We will simply pay out your old loan and get a new loan on your vehicle. 

The benefits of doing this are that you get a better interest rate and also get to extend your loan term, spreading the balance out over a longer time. This way, your monthly loan payments are smaller, leaving more money for your daily expenses. 

This may also be a good opportunity to switch vehicles and get a car that may better suit your needs.  

Get an Auto Loan with Bad Credit or No Credit at Insta Auto Solutions

At Insta Auto Solutions, we make purchasing a vehicle easy for our customers. From online loan approvals to choosing your car online and having your vehicle delivered to your door, the process is simple. We also have experienced technicians onsite in our service department, so if your car needs servicing or you need to put on your snow tires in time for winter driving, we can help! Contact us for more information.